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APA using Coast Hotels buy to introduce urban concept

Executives at both companies believe the pending acquisition will help the APA Group’s global expansion plans and open new opportunities for Coast Hotels.

GLOBAL REPORT—Officials with Japanese APA Group said the pending acquisition of Vancouver-based Coast Hotels opens the door to bring a new hotel concept to North America, and executives with both companies say they see new opportunities arising once the deal closes.

Earlier this month, the two companies announced Japanese construction company Okabe Company Limited plans to sell the 36-property Coast Hotels to APA Group for 210 million Canadian dollars ($162.2 million). The share-transfer agreement is expected to close in early September.

APA Group, which owns APA Hotels & Resorts, plans to introduce its original “urban-style hotel” concept to Coast Hotels, said Toshio Motoya, founder and CEO of APA Group.

“Compared with traditional hotels, in which guests and staff have a relationship that resembles that of masters and servants, guests and staff at new urban-style hotels have an equal relationship,” Motoya said via email. “Unnecessary services for the guests are abolished, and services are provided from the guests’ point of view.”

The hotels offer high quality, high functionality and environmental friendliness, with an emission rate per room that is one third of one at a regular city hotel, Motoya said. While it’s difficult to change existing rooms into compact rooms, APA Group intends to gradually introduce the standard concept of the new urban-style hotel. Owned hotels will install large TVs and washlet (bidet) toilets as well.

Motoya said there are also opportunities to align the two companies’ systems.

“Furthermore, for synergistic effects between APA and Coast Hotels, we would like have a common point system and unify the reservation system,” he said.

APA Group is ahead of its overseas expansion schedule by two years, Motoya said. He attributed that to its membership group growing to more than 1.1 million and becoming the No. 1 hotel chain in Japan.

The company would like to expand the APA brand in North America through franchises, management contracts and mergers and acquisitions within the next two to three years, Motoya said. Following that, the focus will move to expanding the brand into Asia. The company will consider further North American acquisitions if attractive deals are proposed, he said.

The pending deal
The purchase of Coast Hotels complements APA Group’s existing plan for overseas expansion, Motoya said, which started with the 2015 opening of the franchised APA Hotel Woodbridge in Iselin, New Jersey. That property was developed through a partnership with the Friendwell Group.

“Our partnership with Friendwell started on the East Coast, and Coast Hotels are based on the West Coast, which is complementary in terms of geographical regions,” he said. “Moreover, Coast Hotels have developed expertise in owned, management contract and franchised hotels, which we are expecting to apply for expanding our brand within the U.S.”

Okabe decided to shop Coast Hotels to focus more on its core business of construction materials and manufacturing distribution, according to Coast Hotels President Victor Komoda. APA Group is the top hotel company in Japan, he said, and is expecting 2016’s revenue to reach CA$1.3 billion ($1 billion).

“This is a good opportunity for APA and for Coast Hotels,” he said.

APA Group is aggressively trying to grow in North America, Komoda said, and Coast Hotels is a good resource for the company to expand in North America because it’s already a strong existing brand in Canada’s upper-middle markets.

After the deal closes
Motoya said specific financial goals for Coast Hotels haven’t been set at this point, but APA Group aims to expand its portfolio footprint within the U.S. with Coast Hotels’ expertise. Expansion into Asia is also likely a part of future plans.

“In North America, we are aiming to expand the APA brand,” he said. “Three million of APA Hotels’ guests each year are from overseas countries, 80% of which are from Asia. We think that our brand is already recognized in Asia, and believe Asia will be the main battlefield in the future. Utilizing our experience in North America and brand, we would like expand our brand into Asia after two to three years.”

Coast Hotels’ daily operations will continue as usual under the new parent company, Komoda said. Being owned by the largest hotel chain in Japan should open plenty of future opportunities, including expanding its reservations call center for reservations.

Coast Hotels currently manages its own reservation process, he said, and there’s potential for the company to take on reservation services for APA-owned hotels in North America.

“We’re going to discuss those details after closing,” he said.

Komoda said both companies have successful loyalty programs—APA’s program has more than 1 million members—and he believes there’s chance for expansion by finding ways for those programs to integrate and by increasing the number of North American properties.

“This is an exciting thing for both of us,” Komoda said. “I very feel strongly about our future overall.”

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